Landlords and asset managers are working to understand where the new battle lines are being drawn in the fight to secure occupiers. David McLeod offers his tips.
Businesses’ expectations of the post-pandemic workplace have changed and these are disrupting ideas of what the ‘standard’ leasing package should look like. Landlords must respond. Those who embrace flexibility, recognise that tech should be fundamental to their offer, not a bolt-on, and show an understanding of how the workplace underpins wider corporate agendas will be the ones who maintain occupancy levels and secure leases in the post-Covid era.
Business occupiers are grappling with the changing world of work just as much as landlords are. They want to see recognition of that uncertainty, and landlords who can adapt and be flexible will be in a far stronger position to win tenants over.
Office owners must be willing to bend in line with what tenants need, whether that is fitted or unfitted space, furnished or unfurnished and with plug-and-play internet connectivity, or the flexibility to pick a provider. The line between who should provide what at the beginning of a lease is fuzzier than ever, but that also opens opportunities for landlords who are prepared to partner with tenants with an open mind. Those who do will secure more and longer-term leases.
The pandemic irrevocably changed the way businesses operate and tenants expect workplaces to reflect that. Our own research has showed that digital connectivity now trumps location and even rental price for commercial tenants when choosing space.
The second most important step for landlords and asset managers then is to review the digital infrastructure across their portfolios, ask whether it remains fit-for-purpose and invest in getting it up to scratch where necessary.
The offices we left in March 2020 weren’t set up for Teams conversations, Zoom calls and the other digital tools that are now integral to working life. The data these programmes send and receive over online connections put huge pressure on the digital infrastructure in a workplace and landlords must reassure tenants that the building tech can stand up. Offices with high-speed, readily available and robust digital infrastructure will set themselves apart from the competition.
The office has to drive productivity, team culture and creativity but it also has to reflect occupiers’ wider corporate goals – most significantly around climate action. Landlords need to demonstrate that they understand and can support board-level requirements to quantify and reduce carbon.
This agenda was already growing in importance pre-pandemic but the experience of Covid-19 and the national reflection it sparked about businesses’ role in society has only served to heighten this focus. When we surveyed tenants this spring, 59% said they are working towards net zero carbon goals, while a further 40% plan to set a net zero strategy in the next few years. Four out of five tenants would like landlords to prioritise investment in smart technology to improve energy efficiency in buildings, while 69% would pay more for offices with tech that helps them meet their ESG commitments.
Landlords have long been looking at greener building designs and reducing carbon in the construction process. They now need to go a step further and adopt smart building systems that will help tenants monitor their energy use and track against corporate targets.
Investment in smart building tech by asset owners will mean better sustainability credentials and an advantage for attracting tenants, but these systems also bring new data responsibilities.
Smart building systems generate vast amounts of information about businesses, all of which has to be secured. If not properly firewalled, they also offer potential entry points for hackers. Companies are becoming alive to these digital risks and will want to see the right protections put in place by landlords.
Installers can offer cybersecurity assessments but where possible office owners should find third-parties to do this, otherwise vendors are checking their own homework. Assessments are usually free and will provide peace of mind to landlords and tenants.
It’s an unusual time for the commercial offices market but also one full of opportunities for forward-thinking landlords and their partners. Tenants will be reviewing their leasing commitments and we’re likely to see a lot of movement in the coming months and years as they look for space that can better meet their business needs. Landlords who are proactive now will be well-placed to capture a slice of that demand.
David McLeod is co-founder of Backbone Connect